Blog Hero Image

The simple glossary of small business insurance terms

The insurance world is full of unusual and complicated terms that can slow you down when you’re making policy decisions for your small business. That’s where Huckleberry comes in—to make the whole thing simpler and faster.

Here’s a glossary of the most common types of insurance terms and definitions you’ll need to know when considering your options—all in plain English.

List of insurance terminology


Actual Cash Value (ACV)

The Actual Cash Value (often shortened to ACV) is the amount of money a covered loss is currently worth. It’s one of two main methods insurers use to determine value when calculating the size of an insurance claim payout.

To figure out the ACV of an object, an insurer will look up a covered item’s current market value and then consider the item’s depreciation due to its age and expected lifespan. To you, the ACV matters because it is what you can expect to receive should you have a claim.


If you ever need to file a claim with your insurance company, the insurance adjuster is the person who will be responsible for investigating and settling your claim. They’ll look into the incident, confirm your coverages, and figure out what it will cost to settle your claim.

Aggregate Limit

The aggregate limit is the maximum amount your insurer will pay to settle all your covered claims during your policy period.

For example, suppose your business insurance policy has an aggregate limit of $500,000. In that case, your insurance company won’t pay more than that during your policy year—even if your individual claims add up to more than $500,000.

Annual Premium

Your annual premium is the amount of money you pay your insurer every year to obtain insurance coverage.


Arbitration is a way to settle business disputes that uses a neutral third party—called an arbitrator—instead of the legal system. The arbitrator will look at the facts of the case and come to a judgment called an arbitration award.

If your business or insurance dispute goes to binding arbitration, you and the other party in the dispute will agree in advance to abide by the arbitrator’s decision. (In non-binding arbitration, you and the other party will retain the right to take the case to court if you aren’t satisfied with the decision.)

Business Owner's Policy

A Business Owner’s Policy (often called a BOP) is a package deal of the insurance coverages that small business owners need most: general liability coverage, business property insurance, and business interruption insurance.

Business Interruption Insurance

Business interruption insurance provides financial support to your small business if you ever have to shut down temporarily for a covered reason. It will pay for things like payroll, lost income, and ongoing taxes.

Business Property Insurance

Business property insurance is actually two coverages that are often sold together: business property insurance (which will pay to repair or replace your building if it’s ever seriously damaged for a covered reason) and business personal property coverage (which covers the stuff inside your building).

Certificate of Insurance

A Certificate of Insurance (often shortened to COI) is a document that proves to potential clients or landlords that you’re insured. (FYI, Huckleberry policyholders can generate their Certificate of Insurance online—instantly.)

Commercial General Liability Insurance

Commercial general liability insurance protects you and your small business if anyone sues you for bodily injury or property damage. It will pay to cover your legal fees, evidence costs, and financial settlements.


Coinsurance actually has two completely different meanings. Here are both:

  1. You might see the term coinsurance on your business property insurance policy. In this case, it means that you’re required to cover your building up to a certain percent of its value—usually 80%. For example, if your building is worth $250,000 and the coinsurance requirement is 80%, you’ll need to insure it for at least $200,000 to avoid being penalized. (This is the definition that’s most likely to apply if you’re a small business owner.)
  2. The other use of coinsurance is when an insurance policy is provided by more than one insurer. Basically, if two or more companies back your policy, those insurers would be considered coinsurers.



Your deductible is the dollar amount of money you’ll pay out-of-pocket on a covered claim before your insurance kicks in.

So, for example, if you purchase coverage with a $10,000 deductible and then file a claim for a loss that costs only about $7,000, your insurance company won’t issue a check at all. On the other hand, if the loss costs $50,000 to remedy, you’ll pay the first $10,000, and the insurance company will take over from there. Typically, higher deductibles mean more affordable business insurance premiums, and vice versa.

Employee Dishonesty Insurance

Employee dishonesty insurance helps cover your financial losses if an employee ever steals from you. It pays out when your cash or property is taken or damaged by a member of your own team (and it has your back in cases of fraud and forgery, too).

Employment Practices Liability Insurance

Employment practices liability insurance—often shortened to EPLI—protects your business if a team member ever files a lawsuit against you for an illegal employment practice (such as harassment, discrimination, or wrongful termination). It will help pay for the cost of a legal defense and financial settlement.


An endorsement is a modification to your insurance policy. Typically, an endorsement either adds to the scope of your policy or changes some aspect of your policy. For example, if you add a restaurant endorsement to your Business Owner’s Policy, you’ll get additional restaurant-specific coverages that aren’t automatically included in a BOP.

Equipment Breakdown Insurance

Equipment breakdown coverage protects your business equipment in case of electrical failure or mechanical breakdowns. If your electrical, mechanical, or computer equipment fails for a covered reason, equipment breakdown insurance will step in to help cover repair or replacement costs.

Errors & Omissions Insurance (E&O)

Errors and Omissions Insurance is a policy that will have you covered if you ever make an error that harms a client. It will help pay for legal fees and a financial settlement if you’re sued. (It’s also called professional liability insurance.)

Expense Constant

An expense constant is a flat fee that is often added to a workers’ comp policy premium. It covers the insurance company’s administrative costs.

Experience Modification Rate

Your Experience Modification Rate (EMR) is a numerical score representing how safe your business is compared with other businesses in your industry. Insurance companies use it when they calculate your workers’ comp rate. The safer your business, the lower your EMR—and a low EMR usually means a lower insurance rate.

(Learn more about the Experience Modification Rate—and how to use it to get a better workers’ comp price.)

Fiduciary Liability Insurance

Fiduciary liability insurance is coverage that can protect your business if you’re sued due to mismanagement of employee benefit plans.


General Liability Class Codes

General liability classification codes are numbers that represent how risky your small business is to insure. When you get a general liability insurance quote, your insurer will assign your business a classification code based on your industry (because different industries have different levels of risk).

Grace Period

If you don’t pay your insurance premium on time, the grace period is the specified period of time that your insurance policy will remain active after the due date. (It’s usually 30 or 31 days long.)

Hired and Non-Owned Auto Insurance

Hired and non-owned auto insurance is a type of motorist coverage that protects you and your company if someone associated with your business causes physical damage or bodily injury with a vehicle the business doesn’t own (such as a rented delivery vehicle or the car of an employee).


In its simplest form, indemnity means that one party compensates another party for financial loss or damages. It’s a form of protection against financial liability and is a common term in business and insurance contracts.

Insurance Broker

An insurance broker is an intermediate third party between you and potential insurers. They’ll charge you a fee to guide the purchase process and find policy options for you.


Insurtech is the commonly accepted term for a new generation of insurance companies that use technology to make the insurance experience faster, easier, and more efficient.


Legal Liability

Legal liability describes what you or your business is responsible for under the law, usually due to actions or omissions. In the world of small business insurance, it usually describes your legal and financial responsibilities if you cause damage to another person or entity.

Liquor Liability Insurance

Liquor liability insurance protects your business if you ever serve alcohol to a visibly intoxicated person who goes on to cause damage to someone or something.

Loss Payee

The loss payee is the person (or other entity) to whom a claim is paid—it’s the name that will be on the insurance check.

Loss Run

Your loss run is the report of all the claims you’ve made on your business insurance policy. Looking at your loss runs is one of the major ways insurance companies figure out how risky your business is to insure.


Minimum Earned Premium

The minimum earned premium is the absolute least amount of money an insurance company will accept for the risk of insuring your business. It’s generally not refundable if you cancel your policy.


NCCI is an acronym for the National Council on Compensation Insurance. It’s generally considered to be one of the best neutral sources of workers’ compensation insurance information.

Non-Admitted Insurance Carriers

Non-admitted insurance companies aren’t approved by your state’s insurance department—which means the government doesn’t guarantee them. (Use these with extreme caution.)

Occurrence-Based Insurance Policy

An occurrence-based insurance policy will cover injuries and other events that happen during the time that you’re covered. (The alternative is a claims-made insurance policy, which only covers events for which you file a claim during the insured period.)


Per-Occurrence Limit

Your per-occurrence limit is the maximum amount your insurer will pay for all claims that result from a single incident. For example, if your per-occurrence limit is $100,000—and the total cost of all claims resulting from an incident is $120,000—your insurance company will only cover the first $100k.


Your premium is the money you pay for your insurance coverages.

Professional Liability Insurance

(See Errors & Omissions insurance.)

Qualifying event

Qualifying events are any changes in your business situation that affect your insurance needs (such as moving your location, expanding your services, or hiring new employees).

Restaurant Endorsement

A restaurant endorsement is a bundle of handy insurance coverages specific to the restaurant industry (e.g., spoilage coverage, food contamination coverage, and delivery error coverage).

Retroactive Date

Your retroactive date is the date in the past from which your insurance company has agreed to cover you. Any claims for incidents that happen before your retroactive date won’t be eligible for a payout.


Sole Proprietorship

A sole proprietorship is the simplest form of business organization—it’s a business run by one person (and with no legal distinction between the business and the individual who runs it).

(Learn more about the different kinds of business structures here.)

Spoilage Coverage

Spoilage coverage will help pay for financial losses if any perishable goods go bad because of a refrigeration problem (such as an equipment breakdown or a power outage). It’s included in a restaurant endorsement.

Standard Premium

A Standard Premium is one of several premium types calculated when an insurer figures out your workers’ comp rate. It’s not your final premium, though. After your insurer calculates the Standard Premium, they still need to factor in a few costs before issuing your final quote.

(Learn more about how workers’ comp is calculated here.)


Subrogation happens when your insurance company takes your place in a lawsuit against a third party. (Basically, once your insurer pays you reimbursement for a loss caused by someone else, they’ll be able to sue that third party and demand payment for the loss.)


A tort is a wrong act that causes harm to someone or something else. (A tort doesn’t have to be intentional, either! A slippery floor or a sharp tool left in the wrong place could both be torts—and turn into lawsuits—if either result in an injury to a customer or client.)

Umbrella Liability Policy

Umbrella liability coverage is a policy that gives your business extra liability coverage (in case your claims ever exceed your liability coverage amount). Without it, you’ll pay out of pocket for any costs that go beyond your regular general liability coverage limit.


Underwriting is the process by which an insurance company takes on your financial risk (for an agreed-upon price).


Vicarious Liability

Vicarious liability is when someone is held legally responsible (or even partially responsible) for the actions of another party. (For example, you—the business owner—could be sued for a mistake that one of your employees made. Even though you didn’t make the error yourself, you could have vicarious liability.)

Workers’ Compensation Class Codes

A workers’ compensation class code is a category (represented by a number) that indicates your business’s industry. Since your industry has a lot to do with how much risk you present to an insurance company, your class code directly affects how much you’ll pay for workers’ comp.

(Learn more about workers’ compensation class codes here.)

Workers’ Compensation Insurance

Workers’ compensation insurance (often shortened to workers’ comp) protects your employees if they ever get sick or injured because of their job. It’ll pay out for medical expenses, lost wages, and ongoing financial support and medical care.

Workers’ Compensation State Fund

Your workers’ compensation state fund is a workers’ comp option provided by your state government.


WCIRB is an acronym for the Workers’ Compensation Insurance Rating Bureau of California. It’s a source of objective information and research about workers’ comp in California.

We hope this glossary of insurance information was helpful!

Remember: You can get a no-obligation insurance quote for your small business in minutes. Everything is online and easy (and explained in simple English).

get covered icon

Buy business insurance online in less than 5 minutes.

No paperwork. Instant coverage.
No-commitment quote.

Related Blog Posts


All content on this page is for general informational purposes only and does not apply to any specific case, is not legal, tax or insurance advice and should not be relied upon. If you have any questions about the situation for your small business or the latest information in your state, you should contact an attorney for legal advice, an insurance agent or broker, and/or your state's labor or industry agency, board, commission or department. Please note that the information provided on this page may change at any time as a result of legislative action, court decisions or rules adopted or amended by any state or the federal government.

Share this post...